Health Insurance (Amendment) Bill 2016: Second Stage

Question proposed: "That the Bill be now read a Second Time."

I am pleased to have the opportunity to address the House on the Bill which concluded its passage through the Dáil last week. More than 2 million people in Ireland have private health insurance which is community rated. This means that when someone purchases health insurance, his or her age, gender and health status does not affect the price he or she pays. Older and sicker people pay the same price as younger and healthier people. Our community-rated health insurance market means that the cost of health insurance is shared across all members of the market. In general, everyone, with certain exceptions, can buy the same policy at the same price. Older and sicker people pay much less for health insurance than they would in a risk-rated market and people who are less likely to need health care pay more than they would in a risk-rated market. Our market is based on generational solidarity. Younger and healthier people effectively subsidise older people who may be less well and need more care.

Community rating means that health insurers must offer health insurance policies at the same price to everyone, regardless of a person’s current or potential health status. There are a limited number of exemptions to this, including lower prices for children and young adults and higher prices for people purchasing health insurance for the first time after the age of 34 years. Community rating is a different concept from the usual way of selling insurance premiums. In risk-rated markets the premium charged is based on the insurer’s estimate of each person's risk, taking into account relevant factors such as age and existing medical conditions. Healthier people pay low premiums and sicker people pay high premiums. The premium for someone who has held health insurance for many years will rise if his or her health deteriorates under a risk-rated system. Our system of community rating ensures members are not penalised for getting older or for developing an illness.

In 2015 private health insurers in Ireland paid out €2.1 billion in claims. Average claims costs vary significantly for different age groups. In a community-rated market like ours the risks are shared across the market as a whole. This means that health insurance is more affordable for sicker and older people than it would be in a risk-rated market. While community rating does not tell insurers what price they can charge, it ensures they charge everyone the same price. We have community rating because we want to ensure the cost of private health insurance is shared between everyone who decides to buy it. Community rating provides all insured people with peace of mind and also the certainty that if they get sick, their health insurance premium will not increase as a result.

The Health Insurance Act requires all insurers to apply community rating. However, older and sicker customers are not shared equally across the market because of the relatively recent arrival of competition. That is the crux of the issue. Some insurers have worse risk profiles than others, given that they have a much higher proportion of older members. In a competitive community-rated market like ours insurers have a strong incentive to try to attract low risk people and avoid those who are high risk. Claims costs for older individuals can be up to 25 times higher than those for younger people. Insurers, understandably, want to attract healthy people and they do this by advertising in a particular way or by offering additional benefits that appeal to younger and healthier customers. They try to avoid sicker people by designing products that do not provide services that older and sicker people are more likely to need. We do not want insurers to compete like this; we want them to compete by offering better health insurance products to everyone at lower cost.

In order to support community rating and reduce the incentives for insurers to target or avoid particular groups of people, some form of risk equalisation is required. This policy objective has been shared by many political groups in the House in recent years. Community-rated health insurance systems across the world use risk equalisation to share some of the higher costs of older and sicker patients across the entire market. The United States, Australia, Germany and the Netherlands are a few examples of other countries that use risk equalisation to support community-rated health insurance markets. Risk equalisation supports community rating by providing cross-subsidies between insurers with different risk profiles. It aims to neutralise, in an equitable manner, the differences in insurers’ costs that arise owing to variations in the age and risk profile of the insured members.

Risk equalisation is a transfer mechanism whereby money flows from insurers with healthier members to insurers with sicker members. The overall goal is to channel competition in the health insurance market in a way which benefits everyone who wishes to purchase private health insurance. Risk equalisation reduces insurers’ incentives to attract only low risk consumers or to charge higher prices for products that are marketed to high risk people.

A permanent risk equalisation scheme was introduced in Ireland in 2013. Under the scheme, credits are paid to all insurers for their older and sicker members. These credits are funded directly by stamp duty levies on all health insurance contracts written. In effect, the scheme redistributes funds between insurers in order to meet some of the additional costs of insuring older and sicker members. The scheme is self-financing and Exchequer-neutral. It is how we share the cost of insurance between all insured people and ensure sicker and older people are treated fairly.

As well as sharing the cost of insurance, we also want to keep private health insurance affordable for those who wish to purchase it. This is done in a number of ways. Insurers must compete with each other to attract customers. In a competitive market insurers have a strong incentive to manage their costs and offer insurance at the best possible price. Premiums have increased in recent years. The prices of individual policies have gone up. However, the average premium paid by people buying health insurance has not increased to the same extent. By exploring lower cost options with the same level of cover, people have avoided paying the very large increases in premiums that they might otherwise have experienced. The State also supports affordable health insurance in a number of ways, including by providing tax relief at source of up to €200 for everyone with private health insurance.

Supporting affordability in an ageing market is a challenge. The Society of Actuaries in Ireland estimates that the ageing of the private health insurance market accounted for approximately 2.5% of the increase in claims costs each year between 2009 and 2015. This consists of ageing of the overall population, a lower proportion of younger people with cover and a higher proportion of older people with cover. The society estimates that claims costs will increase by 1.7% per year in the next ten years owing to market ageing. Attracting younger and healthier people into the market reduces the average cost of insurance across the market.

In 2015 we introduced lifetime community rating. Loadings now apply when someone buys health insurance for the first time from the age of 35 years. This measure has encouraged and will continue to encourage people to take out health insurance at a younger age. We also introduced young adult rates up to the age of 25 years to smooth the transition to full adult rates. This measure encourages younger people to retain their health insurance. I am pleased to say the number of people insured increased last year by over 100,000 following the introduction of lifetime community rating and young adult rates. This also reflects positive employment trends, which are a key driver of the demand for insurance. That upward trend continues, with a further increase of almost 18,000 in the first nine months of this year.

Legislation is needed each year to update the amount of credits paid to insurers under the risk equalisation scheme and the amounts of stamp duty levied on health insurance contracts to fund the credits. The Health Insurance Authority carries out an evaluation of the market and recommends the level of credits that should apply in the following year. This analysis is supported by my Department’s actuarial advisers. The Minister has considered and accepted the recommendations made by the authority. Higher credits will be required under the scheme next year for a number of reasons. Claims costs have increased. Payments to public hospitals have also increased as a result of the changes to charging regimes for private patients in public hospitals. The market has continued to age and insurers must also cover the cost of medical innovations in treatments and new drugs. No changes are proposed to the existing level of hospital utilisation credits provided for insurers under the scheme. They remain at €30 for each day case admission and €90 for each overnight stay.

The Minister proposes to significantly increase the age-related credits paid to insurers in respect of older people. For example, the credits for women aged 85 years and over holding advanced cover will increase by 33% to €3,700. The credits for men aged 75 to 79 years holding non-advanced products will increase by 49% to €1,750. This means that all insurers with 85 year old female members with advanced cover will get €925 more credits in 2017 over 2016, while insurers with 75 to 79 year old males holding non-advanced cover will get €575 more in credits. This is a reasonable measure to reduce the average cost of insuring older people.

Owing to the fact that the scheme is designed to be self-financing, the total amount of credits provided matches the stamp duties raised. The stamp duty on health insurance products will increase by 10%. This means that the stamp duty on advanced cover products for adults will increase from €403 to €444 and on non-advanced products it will increase from €202 to €320. It is important to note that increasing the stamp duty levies does not increase costs across the market. This is a very important point and one which various commentators in the media need to remember. We need to encourage our insurance companies not to use this as an excuse to hike up insurance premiums and we certainly do not need people defending it as an excuse. All money raised is paid back to insurers in the form of credits. Increasing the credits and stamp duties under the scheme is needed to continue to share costs across the market. The examples of increases in credits clearly show that the levy increases should not equal higher premiums. The amount of any increase or reduction that individual insurers pass on to consumers is a commercial decision for each of them. It is important to note that all of the money raised in stamp duty levies under this scheme goes back to insurers in order to ensure we continue with our community-rated scheme which provides support for older and sicker people with health insurance.

In previous years the revised credits and stamp duties have come into effect from 1 March. This year the proposed effective date for the revised credits and stamp duties is 1 April. The change in date will facilitate the administration of stamp duty collection by the Revenue Commissioners and provide an additional month’s notice to insurers.

While the changes to the credits will help to maintain existing levels of support for community rating - sometimes referred to as the effectiveness of the risk equalisation scheme - I am pleased to note that further improvements are planned. The Minister is committed to making the risk equalisation scheme as effective as possible in a way that promotes fair and open competition. The introduction of a more refined measure of health status for the allocation of credits between insurers is required. Using diagnosis-related group, DRG, data in the future will allow for better targeting of credits to all people who require higher levels of health care. We need to ensure the support provided in the form of credits is getting to where we want it to be in the market. Refining the health status measure using DRG data will further reduce the incentive for insurers to attract low risk people and avoid high risk people. Introducing this change will take time as there are complex data collection and system issues to be addressed. The Minister has asked his officials to focus on progressing this change, in conjunction with the Health Insurance Authority, in the months ahead.

The risk equalisation scheme was approved by the European Commission earlier this year as a compatible state aid for the period 2016 to 2020. The scheme underwent detailed examination by the Commission to ensure it was administered in a fair and transparent manner and did not unduly distort competition in the market.

As part of the process of achieving Commission approval, two changes to the scheme are proposed in the legislation before the House. First, the Health Insurance (Amendment) Bill 2016 provides for a new objective to be considered by the Health Insurance Authority when recommending the level of credits to apply under the scheme. The net projected average claims cost for all age groups aged 65 years and over should not be less than 125% of the projected market average net claims costs. This limits the amount of credits that can be provided under the scheme, while allowing credits to increase in monetary terms to reflect any claims cost inflation. As Minister for Health, Deputy Simon Harris must also have regard to this objective. Second, the measure of reasonable profit, used to ensure no insurer is overcompensated by the risk equalisation scheme, will be defined as an average return on sales, gross of reinsurance and excluding investment income, of 4.4% or less over a three-year period. Using return on sales to measure reasonable profit has a number of advantages over the existing return on equity measure. It is based on easily observable accounting profit and sales data and avoids the valuation and allocation of assets between services. The proposed changes to the operation of the scheme will ensure competition between insurers is protected.

People are naturally concerned about any increase in the price of health insurance. While both the Health Insurance Authority and I encourage people to keep their options open and compare between insurers to obtain the best value, I also understand it can be difficult to make a decision when there are so many products on the market. This is a real problem. There are many products offering similar benefits at very different prices and it is not easy to pick the best option when so many products are available. The market needs to be simplified. I am pleased to see that the number of products on the market has decreased in the past year from 381 to 354. I hope to see this downward trend continue and encourage insurance companies to continue to simplify the list of products available to customers in order that it is easier for them to compare and contrast policies and their cost. The Health Insurance Authority has launched an information campaign to advise consumers of the significant savings that can be made at policy renewal time by actively reviewing their health cover to ensure they are getting the best value. This comes on foot of research conducted on behalf of the Health Insurance Authority which found that only one quarter of policy holders had switched providers at any time since taking out private health insurance. Keeping consumers informed of their rights and options is a key priority in supporting community rating.

The Bill provides further clarity for insurers about when they can withdraw products from the market. It also ensures that when a person's existing plan is withdrawn, he or she will be offered a plan which provides at least the same level of benefits as his or her current one.

The proposed changes will mean that the existing lifetime cover regulations are no longer required and the Minister will revoke them in due course.

I will now briefly outline the specific sections of the Bill. Section 1 defines the principal Act as the Health Insurance Act 1994. Section 2 substitutes section 7AB(3) with a new section that provides that insurers cannot change a plan from advanced cover to non-advanced cover or vice versa except on 1 April each year from 2017 onwards. This is a technical amendment to facilitate the administration of stamp duty levies.

Section 3(a)(i) is a technical amendment to section 7E of the principal Act to delete the reference to "bed". Section 3(a)(ii) is an amendment to section 7E of the principal Act which provides that the Health Insurance Authority must have regard to the objective that the projected net average insurance claim payment per insured person for a relevant group of insured persons should not be less than 125% of the projected net average insurance claim payment per insured person for all age groups, a point I outlined. Section 3(b) is an amendment to section 7E of the principal Act which requires the Minister for Health also to have regard to this objective. Section 3(c) inserts a new section 7E(4) which provides for definitions of "net" relating to the average insurance claim payment per insured person and "relevant age group of insured persons".

Section 4 amends section 7F of the principal Act to provide that from 2016 onwards, a reasonable profit for the purposes of determining over-compensation of a net beneficiary of the scheme is defined as a return on sales gross of reinsurance and excluding investment income that does not exceed 4.4% per annum over a three-year period.

Section 5 amends section 9 of the principal Act to set out the circumstances when a health insurer can withdraw products from the market. It also provides that when a particular product is withdrawn from the market by an insurer, people holding the product being withdrawn from the market must be offered a replacement contract with the same level of benefits, subject to small differences in excess amounts.

Section 6 amends section 11C of the principal Act. It provides for 1 April 2017 as the effective date for revised risk equalisation credits to be payable from the risk equalisation fund.

Section 7 replaces Table 2 in Schedule 4 to the principal Act with effect from 1 April 2017. The risk equalisation credits payable from the risk equalisation fund for certain classes of insured persons are revised.

Section 8 amends section 125A of the Stamp Duties Consolidation Act 1999. It specifies the applicable stamp duty rates from 1 January to 31 March 2017 and from 1 April 2017 onwards.

Section 9 provides for the Short Title, collective citation, commencement dates and construction of the Bill. Sections 5 and 8 will come into operation on 1 January. Sections 6 and 7 will come into operation on 1 April. All other sections will come into operation when the Bill is enacted.

The annual adjustment of the credits and levies under the risk equalisation scheme provides us with an opportunity to reflect on the role of private health insurance in the health service. One of the first priorities the Minister identified when he took office was the need for a long-term consensus on the direction of health policy. To help achieve this, the Committee on the Future of Healthcare has been established to devise cross-party agreement on a single long-term vision for health care and direction of health policy in Ireland. I have no doubt that the current and potential role of private health insurance both as a source of funding for the health service and as a driver of the model of care people receive will be considered as part of the committee's work. We look forward to receiving the committee's deliberations. Through the work of the committee, I hope we will be able to articulate clearly our desired model of care, the implications of moving towards it and how it can be achieved.

We want to move towards a sustainable public health service in which all citizens can have confidence and trust that they can access the care they need when they need it. In the meantime, we must maintain our support for the core principle of community-rated private health insurance. By revising the credits and the stamp duties required to fund those credits to take account of market trends, we can continue to provide the necessary support to ensure the costs of health insurance are shared across the insured population. We must not fall into the trap of believing spin on this matter. The stamp duties go to insurers - every single cent - to ensure sicker and older patients can continue to access private health insurance without being penalised for being older or sicker. It is a principle we, as a House, have valued and it is a principle that should not be used by private health insurance companies to exploit customers.

I commend the Bill to the House.

I welcome the opportunity to speak to the Bill and welcome the Minister of State. Fianna Fáil will be supporting the Bill, although it is disappointing that risk equalisation levies are set to increase in 2017. The Health Insurance Authority which regulates health insurance states the increases are designed to support risk equalisation and sustain community rating in the health insurance market in order that older citizens and people with illnesses can afford health insurance and are not discriminated against in favour of younger, healthier people. Risk equalisation and community rating is something we have always supported as a party.

The Bill provides for a 10% increase in health insurance stamp duty levies, as recommended by the Health Insurance Authority. Stamp duty in respect of products providing advance cover is to be set at €444 per adult, an increase of €41, and €148 per child, a rise of €14. Whereas we accept the judgment of the regulator on what is needed to maintain stability in the market, this is a very big increase. A big problem with the levy is that it is a flat levy; therefore, it is socially regressive from a taxation perspective. Somebody who pays €700 for a plan has a levy of €444, the same as somebody who pays over €5,000 for a plan, which is nonsensical. There is no other stamp duty that operates like this within the system. VHI competitors believe the flat rate of the levy acts as an advantage for VHI, as it has the highest premiums in the market and hence is most advantaged by putting in place a flat levy. It is the case that the flat levy means that those on the lowest plans are paying disproportionately more than those on higher plans.

There is another issue that arises with the levy, particularly the fact that the full levy is payable the moment a person pays his or her first premium, even if it is subsequently cancelled. Credits are only provided on a monthly basis and this mismatch causes problems that have previously led to a surplus in the scheme, pocketed by the Revenue Commissioners. In 2009 Fine Gael claimed a €160 levy was anti-competitive and a means to prop up the State-dominated player, while VHI remained super dominant in the health insurance market. The levy has increased from €160 to €444. Our values as a party are to support older and sicker people. It is not just from a sense of obligation but because we respect and value older people and the dignity of each person in his or her illness, medical condition or disability. That is why when in government we decided on a comprehensive set of actions to support older and sicker people who have private health insurance. We are firm in our view that the principle of solidarity should apply in private health insurance, as well as in public health services.

Private health insurance has played an important role in funding and organising health care in the country for more than 50 years. In 2010 it was funding €1.7 billion of health care claims. As the Minister of State knows, in excess of 2 million people have private health insurance cover and among them nearly 340,000 people are aged 60 years and over. Many have been paying for health insurance all their adult lives and have the entirely fair expectation that the health insurance market will not be permitted to change in a way that diminishes their cover. It is entirely right for people to expect that they would not face higher health insurance prices just because of their age or a particular medical condition. This is because consistent State policy has been that the health insurance market should be community rated. People have known and relied on this.

Irish Life Health has indicated the largest provider of hospital services in the State for the private sector is the Health Service Executive, HSE, which now receives in excess of €620 million from private health insurance. Additionally, it is estimated that consultants working for the HSE also receive in excess of €140 million from fees generated from private work in public hospitals. Irish Life Health also indicates that the evolution of legislation within the health insurance market has led to private health insurers being forced to drive customers into public hospitals and public bed charges have created a situation where public hospitals have a financial incentive to prioritise private patients over public patients, which is morally wrong. This has created inequity for public and private patients who, in effect, pay twice to receive the same service. Private patients are charged €813 per night for the same public bed or, in some cases, the same trolley. Normally, they would be seen by the same consultant they would have as a public patient. As they have paid for the service through taxation, they have a double hit. The logical conclusion is that if equity is to be achieved within the public health system, the HSE should cease providing all private health care services and concentrate services on public health. This would require additional funding for the HSE and a fundamental reassessment of the reimbursement model for consultants working within the HSE.

I welcome the Minister of State and thank her for bringing forward this legislation. I agree with my colleague. We are concerned when any levy is increased. That is the challenge we face in the next 15 or 20 years. If one looks at the growth of the population over 66 years, it will continue to increase. Pensions alone will cost an extra €200 million per annum because of the increase in the number of people who are reaching retirement. There will be an average of 20,000 people per annum added to the number of people entitled to draw an old age pension. That is also reflected in the change in health services. The one frightening figure we find in health services is that 51% of all hospital beds are occupied by people over 66 years of age. We will have a growing problem in the next ten to 15 years.

My understanding is the number of people aged over 66 years will be approximately 1 million by 2030. It is around 600,000 at present. Therefore, we will face a major challenge in this area. It is something at which we need to look. We also need to look at the fact that, per head of population, the cost of health care in this country is higher than in other EU countries. How can we continue to improve and increase the level of services we provide, while at the same time ensuring we get cost efficiency? We will have another debate later on about the cost of a particular drug, but we seem to have a major problem with the overall cost of pharmaceuticals. That is part of the huge costs in the health service. If one looks at the Department of Health and the HSE budget, it is €14.5 billion this year. There is another €3.5 billion to €4 billion for private health care across a range of areas. We are talking about over €18 billion per annum in health care. That will continue to increase. In order to keep people paying for insurance, there has to be risk equalisation. This is the fairest way of doing so. While no one welcomes any increase, unfortunately because of the changing demographics, it is likely to continue. I note where the changes have come in. The other area where it is increasing is in the over-85 age group which has increased by over 20% in a very short time period of six to seven years. In the Bill the contribution for someone over 85 years is €3,700 per annum. It will obviously be a growing figure each year. I welcome the Bill. We have to continue with this equalisation process.

While we welcome that an additional 100,000 people have begun paying for private health insurance in the past 12 months that will probably level off. Other challenges such as the cost of renting and buying housing will have a knock-on effect when trying to increase the numbers of young people who have private health insurance. If we do not increase the numbers, the problem is that risk equalisation will have to continue and will increase the cost. That is one of the challenges we face. We need to look constantly at how we can make the system more efficient and deliver a top of the range service while at the same time not increase additional costs.

I will touch on one other issue with people paying private health insurance which I came across as recently as yesterday. It is in respect of eye care and involves a person who has insurance but requires a particular treatment in order to prevent them from going blind. The cost of the operation for each eye is around €4,000. They are now being advised that their policy does not cover them for this particular type of operation. One of the things that is happening is that people sometimes buy into insurance thinking they are covered for a range of areas and then find when the issue arises that the cover is not provided.

The other issue I have come across is where a particular treatment is not available in Ireland but is available in the United Kingdom, for instance. The treatment recommended to the person is in their best interest, yet there is reluctance on the part of the insurance company to get involved in providing cover. We have ended up going in and battling with the insurance company to try to bring it on board. There is a huge long-term saving for the individual and also for the company because if the particular procedure recommended is not completed, the person will end up spending longer in the hospital service. Sometimes when we look at problems, we look at the here and now but do not look at the long-term issue of how to save costs at a later date. It is welcome that we are progressing with this matter. We need to have an overall discussion on this matter in the long term. How will we face the challenges in the next five to ten years on this issue? The age profile is continuing to change. In order to make sure we do not have the same increase next year and the year after, we have to increase the numbers who are paying private health insurance. Otherwise we will have to continue to increase the levies that apply in each category. I thank the Minister of State. We will support the Bill.

The greatest deficiency and most damaging factor in the health system is the absence of universal health care. There is an incurable reliance on a two-tier system. Fine Gael and Fianna Fáil are responsible for building this inadequate health service over decades which has led to the poorest citizens suffering and dying because of their inability to pay. Disturbingly, we have built a public health service which survives precariously on life support owing to private sector intervention at huge cost to the taxpayer.

I read with interest the Minister for Health's response to the debate on Second Stage in the Dáil. One thing that struck me in his remarks was his reference to risk equalisation and that if we did not advance this, we would be "leaving some of our sickest and some of our most elderly citizens who access private health insurance" exposed. He said this legislation would "protect them from much higher premiums were we in a risk-rated free market type approach to this." The Minister took issue with some speakers who criticised private health insurance and its influence on the development of a universal system. His remarks were that "we cannot close our eyes, put our hands over our ears and pretend that almost 50% of our citizens do not have private health insurance."

We cannot support the passage of this legislation and wholeheartedly reserve the right to criticise the flawed model on which the two-tier health system is based and which creates and entrenches deep inequalities. It is clear that it is the poorest and sickest who find it hardest to pay charges no matter how small those charges are and who find it harder to negotiate access. It is also the poorest and sickest who have to wait longest for care. Care should not be provided based on ability to pay. The fear of being left high and dry in an hour of need is what drives 50% of the people to private health insurance. That is not acceptable.

Reference was made to the 100,000 people coming back into the health insurance market.

In the horrific years of austerity, health insurance was the first thing to go in people's budgets as they tried to survive the bills. Now they are coming back in, but the burden placed on the health service in that decade was enormous. We are still suffering from it now.

We should be building an all-Ireland public hospital system that will look after citizens on the basis of need and regardless of wealth or location. The Department does not collect specific data for the cost to the Exchequer of operating a private system of health care. If we are investing in the NTPF without recourse to what could be done to enhance services in the public system or if we are enabling a private insurance market, we must have some idea of the cost of the two-tier system for the Exchequer. Last week my colleague in the Dáil, Deputy Louise O'Reilly, asked for the data for the number of treatments commissioned from the private sector versus the number of treatments carried out; the number, type and value of services and surgeries commissioned from the private sector and the number, type and value of those carried out; and the cost and savings to the State of services and surgeries carried out by the private sector. This is important information when discussing capacity issues in the public health system, but Deputy Louise O'Reilly was advised that the detailed information sought was not available at the time, that the NTPF had been asked to provide the information requested and that it would be forwarded to her. At a time when the Minister is reactivating the NTPF, allocating €20 million to it and with that figure to rise to €55 million in 2018, and when contracts are being entered into with the HSE, he does not have available to him data related to the efficiency and value for money of embarking on this course. One need only look to the various reports that were produced in England recently to see that this course did not increase capacity.

Align all of this with the fact that the full capacity protocol was deployed an amazing 2,300 times across a 321 period in 2016 across 26 hospitals. The protocol of last resort is being used with such worrying frequency that alarm bells must be going off in the Department of Health about the lack of capacity. Despite the Government's rhetoric about the largest investment in health in years, it appears that it is not enough. International research definitively shows that insurance based systems are more expensive and cause inequalities. In Ireland 45% of the population have private health insurance, yet it contributes less than 10% to the overall budget. At a meeting of the Committee on the Future of Healthcare Dr. Sara Burke explained that this is due to the fact that private health insurance in Ireland largely insures somebody for inpatient or day case elective hospital care. It does not cover most other matters such as most outpatient care, outpatient appointments with specialists in the first instance, the cost of drugs and most primary care payments. This is a blatant example of poor value for money. It shows that the public system is subsidising the private system because while 45% of the population has private health insurance, the majority of the expense of health care is not paid for by private health insurers. This was an issue for the Minister and there is a new charging regime for private patients in public hospitals. However, if private insurance is only providing one link in the chain, with the rest left up to the public sector, it means that we are subsidising the private sector. That sector cherry picks and takes the best and most profitable parts, leaving the public health service to pick up the pieces. It is called privatising profits and socialising losses.

How far have we come since Susie Long's untimely death? How is promoting private health insurance a step towards universal health care? It is not. Public services are under-funded; they cannot retain or recruit staff and there are chronic waiting lists of almost 500,000 at the last count. I hope the next time the Minister comes to the House with a Bill such as this, there will be a plan for untangling the marriage of public and private health systems. We will not support the Bill.

I thank Senators for their support, for the most part, for the Bill and their contributions to the debate. To recap, the main purpose of the Bill is to specify the risk equalisation credits and corresponding stamp duty levies from 1 April 2017. The Bill also makes a number of changes to the operation of the scheme, providing for a new benchmark of reasonable profit for the over-compensation test and placing a limit on the amount of credits that can be provided. The Bill also clarifies the circumstances where an insurer can withdraw a product and seeks to ensure people are offered a replacement product with at least the same level of benefits.

Sharing costs across the community-rated private health insurance market must take account of the realities of the market and, as Senator Colm Burke mentioned, the increasing population and demographics. The proportion of people in their 70s with health insurance has increased by almost 40% in the past 13 years and the proportion of people over 80 years of age with health insurance has doubled. At the same time, there were large decreases in the proportion of people in their 20s and 30s with health insurance. The introduction of lifetime community rating, young adult rates and the improved economic environment have helped to reverse this trend. To echo Senator Colm Burke's point, the number of people with health insurance is generally associated with employment levels. As unemployment rates continue to decrease and we continue to offer incentives to encourage young people to take up health insurance, we hope that number will not stabilise but will continue to increase.

These changes, coupled with the ongoing increases in employment, which is a key driver in the demand for health insurance, will support the market and everyone wishing to avail of private health insurance. The Bill provides for 10% increases to the existing stamp duty levies. However, the Bill's primary purpose is to provide the necessary credits to insurers to reduce some of the additional costs they incur by insuring older, sicker members. It is proposed to increase those credits significantly to insurers. The changes will not offset all of the additional costs of insuring older and less healthy people, but they will help to keep health insurance more affordable for them. With regard to the percentage based stamp duty, in 2015 and 2016 one of the insurers indicated a preference for switching to the percentage based stamp duty. While this view has been taken into account by the authority, it has not recommended changing from the current system of fixed amounts to stamp duty. Under the scheme all of the money raised in levies from insurers is paid into a fund for the sole purpose of supporting the market in the form of credits payable. Any decision to pass on the benefits of higher credits or the cost of higher stamp duty levies to consumers is a commercial pricing decision for each insurer.

Most Senators raised the issue of public versus private health care. Changes to the charging regime for private patients in public hospitals have contributed to some of the increase in claims costs. The Minister for Health, Deputy Simon Harris, recently met all of the health insurers and listened to their concerns about charging private patients in public hospitals. I understand the HSE and insurers have met twice since to discuss and resolve the issues. There is ongoing engagement, which is welcome. People using public hospitals are fully entitled to opt to be treated as public patients. If they hold private health insurance, they are also free to waive their entitlement to public treatment, opt to be treated as private patients and use their private health insurance. The charges for private patients in public hospitals go towards meeting part of the cost of providing the hospitals' services for private patients.

As regards the issue of universal health care and in recognition of the issues outlined by Senator Máire Devine, the Committee on the Future of Healthcare is examining this issue. I hope we can achieve a system of universal health care in the future, with a role being played by private health insurance. However, that is something to be discussed at the committee. The Bill allows us to maintain our support for the core principle of community-rated private health insurance. By revising the credits and the stamp duties required to fund those credits to take account of market trends, we can continue to provide the necessary support to ensure the costs of health insurance are shared across the insured population.

I commend the Bill to the House and agree with Senators that further discussion will be required at a future date.

Question put and declared carried.

When is it proposed to take Committee Stage?

Committee Stage ordered for Tuesday, 13 December 2016.
Sitting suspended at 2.20 p.m. and resumed at 2.30 p.m.